It is said that the U.S. economy lost more than a trillion dollars of wealth in the last five days, owing to the steep declines in stock markets in the wake of the terrorist attacks on New York and Washington. The implication is that the equivalent of 100 World Trade Centers have vanished from the capital stock of the U.S. economy, leaving all of us that much poorer as we struggle to rebuild and recover.

Nothing could be farther from the truth than this. To be sure, air travel concerns and the uncertainty of an impending conflict have dovetailed with existing concerns over fragile economic growth to give us all a different expectation of the future than we had just a few weeks ago. But if the commentators, stock tickers, and TV cameras that are tracking the sights and sounds of financial markets are trying to learn something about the economy, they are chasing a myth. In the real economy, where men and women produce goods and services with their hands and their minds, there are no instant changes.

However, there can certainly be changes in direction. We are told that the economy is changing course as we speak, but until the numbers arrive that measure actual economic activity -- not the perceptions of the future reflected in stock prices -- we cannot say. And what we can say from the data on hand might surprise you.

The manufacturing sector has been taking a beating in recent months all across the nation. The steep declines in business spending, softness in motor vehicle sales, and the effect of the strong dollar on exports have forced cutbacks in every industry, ultimately resulting in the loss of 940,000 jobs nationwide over the last twelve months.

Those declines have been felt in Indiana, both through job losses and in cutbacks in overtime and work weeks in facilities still operating. But in most Indiana cities, the evidence suggests that the worst is behind us and that production is cautiously ramping back up.

According to the Department of Workforce Development, Indiana manufacturing employers' payrolls numbered almost 31,000 fewer in August than during that same month one year ago. That 4.4 percent decrease, however, is somewhat milder than the 5.1 percent decline experienced by the nation. And the good news is that average weekly earnings in manufacturing across the state appears to have bottomed out in the spring, with a significant growth registered over the last four months.

The profile of average weekly earnings in manufacturing for the state of Indiana clearly shows that the hardest times for goods-producing facilities in the state occurred in the five month period that ended last April. In that span of time, average weekly paychecks fell by about $30, but have made up about two thirds of that difference since.

That may sound like chicken feed next to the dollars being lost and won every day on Wall Street. And there's no question that events in financial markets will influence economic growth in the future. But even a mild rebound in production at factories around the state, and around the nation, is proof that the sky around us is not falling as fast as some people think.

Patrick Barkey is director of the University of Montana Bureau of Business and Economic Research. He has been involved with economic forecasting and health care policy research for over twenty-four years, both in the private and public sector. He served previously as Director of the Bureau of Business Research (now the Center for Business and Economic Research) at Ball State University, overseeing and participating in a wide variety of projects in labor market research and state and regional economic policy issues. He attended the University of Michigan, receiving a B.A. ('79) and Ph.D. ('86) in economics.

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